Corporate Investment in Hungary – Stylised Facts on Micro Data

This paper investigates corporate fixed investment in Hungary between 2001 and 2014 using firm-level data. We analyse the composition, heterogeneity and the drivers of corporate investment. Investments in Hungary are highly concentrated and dominated by large and foreign-owned companies. The period investigated can be split into three parts: the 2000s with moderate performance, the crisis period, and the period of weak recovery in 2013-2014. We find that structural problems were already seen before the crisis: the investment rate was stagnant and investment activity declined. However, the performance of firms was heterogeneous, as smaller and middle-aged firms became less active and dynamic. During the crisis, investment performance markedly deteriorated. Signs of recovery were seen in 2013 and 2014, but the investment rate remained subdued. We show that the ageing of the group of smaller firms played an important role in their weak investment performance, while the lack of new entrants contributed to the sluggishness of the recovery. We did not find any evidence that changes in individual sectors’ weight in the economy contributed to the low corporate investment rate or the weakening activity.